Source Talks is a series where we discuss deal origination with PE and M&A pros, in collaboration with David M. Toll of Private Equity Career News.
In honor of the 50th episode of Source Talks, on this special extended episode we interview Jay Jester of Plexus Capital, a seasoned thought leader in the art of private equity investing and business development. We discuss the most valuable lessons he’s learned over his career, the firm’s collaborative approach to deal sourcing, and exciting new advancements for his team.
Jay, tell us about Plexus Capital, your role there and the kinds of deals that you sponsor.
Plexus was started in 2004, the core business, the legacy business at Plexus is an SBIC strategy focused on independent sponsors or a credit-led strategy. I was invited to join and to buy into the partnership and launch a control equity fund. We’ve been at that since I got here in 2019. We raised fund one a hundred percent during Covid, which was an adventure as we deal with a lot of family-owned businesses. We invest all over the United States, but I’ll always break a tie for a drive-to-deal. We’re looking for great leaders. We’re looking for pretty basic businesses that are looking for an operationally focused hands-on partner who’s willing to roll up sleeves and help. Some examples include commercial landscaping, lake and pond management, think pool service for retention pond and golf course ponds, athlete-based physical therapy, industrial maintenance, utility services, waste services, fire and life safety that that type of business is where we were playing out of the equity fund.
Jay, tell us about your approach to finding those transactions that you just described. How do you find deal flow?
I’ll start with one of my favorite quotes. It’s from a scientist named Linus Pauling, who’s one of the few scientists who have won individual Nobel Prizes in two different disciplines. His quote was the best way to have a great idea is to have a lot of ideas. And so, to see lots and lots of ideas from lots and lots of places, I think is just foundational in deploying a small equity fund. We’ve got 45 people at Plexus. Every single person at Plexus is part of the sourcing game. We’ve seen very interesting deals come from all over. We’ve created this culture that is, I would say it’s inclusive, inviting everybody into the sausage-making of finding ideas. It’s really transparent. We have a racetrack meeting, and it’s every Friday at 9:00 AM and it’s mostly the deal team, but everybody at the firm is invited to join and to see the conversations and the networking.
What are some of the principles that you’ve developed in finding transactions that have really served you well during your career?
I’d say number one is feed your network. I think it’s like a garden and you have to nurture the network. And the way that you nurture the network is you take some really good ideas and some really useful contacts and some timely introductions that have no chance of generating a short-term profit for you, and you feed that to your network. And over a very long career, it has just been awesome to see the unexpected payback from taking the time to feed your network.
Jay, tell us about the role that technology plays in your deal sourcing operation there.
The most valuable piece of information in our industry is the right guy at the right company at the right time. And what this combination of all of this technology allows us to do is to get to that person faster, more often, and in exactly the right moment. Going back to that theme I talked about earlier of trust and connectedness being at a premium, being the real currency of our market today. It’s fun to see technology help you make those super high value connections faster and more efficiently. I’ve got to give a shout out to your colleague Nadim. Nadim and I go back way back to when he was at American Capital and what he created for ACAS is amazing. It’s been fun to watch him build Sutton Place and the stuff that we used to have tons of internal resources collecting the market data, the multiples, the buyers and the sellers. We don’t need to spend any time on that internally. It is right there at your fingertips.
Jay, tell us about a company that you’re really excited about right now and how you did find it.
We’ve got a business in Charlotte that is an athlete-based physical therapy business. There are so many things I love about this one. My wingman at Plexus submitted the idea for this company and we have this thesis program and everybody at the company can say, hey, I think we should do this. He basically described this company without knowing that this company existed. He wrote it up, direct access in North Carolina is a powerful thing. The kind of market we’re in physical therapy for athletes is a really attractive market. We do a voting process, and it was kind of in the middle of the pack because we didn’t have a lot of bases there. And about a year later, he comes running in my office and it was, you know, you see those videos of kids that open that the video game platform they got for Christmas and lose their minds.
It was that level of excitement, which was fun to see. He brings this idea and says, this is it! This is exactly the kind of company I envisioned. And it was so much fun because it was a competitive process run by really good banker. There were several strategic buyers and larger private equity funds, and we had, we just built the right kind of relationship with the seller and CEO. We still had to win. I think we won on both price and relationship. It’s in North Carolina in our core market. It is a business that that helps people get healthier and recover, which is so much fun to have that healer mentality driven by the CEO and his whole team. I’m so humbled by this deal. My plans don’t matter. The CEO is one of my favorite people and a wonderful leader. And I hope this doesn’t sound cheesy, but my plans are to help turn his plans into reality.
